Friday, February 27, 2009

Just wanted to take a second and let everyone know that we here at Market Folly have been posting over at Twitter and StockTwits for some time now and if you aren't already, you should definitely follow our posts there. Why? Because we post up our portfolio activity there, as well as unique market insight that is not featured here on the blog. (Cliff's Notes on how to follow us listed at the bottom of this post).

What is Twitter?

Twitter is a service for friends, family, and co-workers to communicate and stay connected through the exchange of quick, frequent answers to one simple question: What are you doing?

It is essentially a mini-blog where you post messages that are 140 characters in length. Think of it as blogging meets texting meets facebook status updates meets instant messenger. You can post up your thoughts, converse with people, and "follow" each others posts by clicking the follow button on their page. Here is Market Folly's Twitter page:Follow Us! (And, if you haven't noticed, our Twitter updates are posted on the right-side column of the blog as well). In order to follow us, all you have to do is sign-up for Twitter for free. And, there's also another reason to sign-up for Twitter.

What is StockTwits?StockTwits is an application linked to Twitter specifically geared for those interested in trading, investing, and markets. (Check out the WSJ press coverage & the 'how to' guide). Basically, a huge community has sprouted up on Twitter that talks about all things financial markets. Stocktwits is where this happens. Included in this community are well known traders/investors like Doug Kass, Eric Bolling, James Altucher, Paul Kedrosky, Howard Lindzon, and many more. There's also a large amount of prominent financial bloggers on there as well. Simply put, its an awesome community full of knowledgeable and helpful people.

In order to participate, just sign up for Twitter and make sure you "follow" @StockTwits and @marketfolly. Fill in your bio and add a picture so we can get an idea of who you are or how you trade/invest. After you've signed up, go to StockTwits and log in with your information. Poke around and take it all in so you can see how everything works. There's some great tutorials on their site and blog. Then, when you're ready, start to interact and contribute.

There's two ways to participate in the market talk. First, if you're talking about an individual company/ticker, just preface the ticker with a '$' sign. For instance, AAPL becomes $AAPL. This ensures your message is picked up by the community. If you just have general market commentary without a specific ticker, add a '$$' to the very beginning or the very end of your message. For instance: $$ The banking system is insolvent. Or: The market is doomed $$. Note that if you mention a ticker prefaced by the '$' in your post, you don't need to use the $$. You can also talk about futures and forex, and that info is covered on the StockTwits blog.

The easiest way to learn is to observe for a little bit and then to jump right in, as people will help you along the way. If you're confused, you can read some of the articles we've linked to below which help to explain everything.

We'll be posting a follow-up with some more specifics on how you can really utilize Twitter and StockTwits. If you have any questions at all, feel free to email us (marketfolly at gmail dot com) and we'll help you get started out. Now, hurry up and find out what you've been missing out on!

Thursday, February 26, 2009

This is the 4th Quarter 2008 edition of our ongoing hedge fund portfolio tracking series. Before reading this update, make sure you check out the Hedge Fund 13F filings preface.

Next up, we have Atticus Capital, the hedge fund ran by Timothy Barakett. In 2005, Atticus' funds were up a combined 45%. And, they finished well over 30% for 2006. Barakett founded the firm at age 29 in 1995 and focuses on taking large, concentrated positions in companies. One of Atticus' most famous investments was Phelps Dodge, a miner which was bought out by Freeport McMoran (FCX). At one point, Atticus owned more than 9% of Phelps. Barakett received both his BA in Economics and his MBA from Harvard. Its very evident that Barakett employs macro based investment theses. Once he has decided on what the trend is, he will find the best company within that trend and he will place a big bet. And, when needed, he will step in and take an activist role, ensuring the company is performing to his liking. A fun fact about Barakett is that he was a Harvard hockey teammates with Philip Falcone of Harbinger Capital Partners, whom we also cover.

You may have heard about Atticus over the past year simply because their performance has not been up to par, to put it politely. In a September hedge fund performance update, we noted that Atticus European was -42.5% for 2008 back in September while Atticus Global was -27.2% over the same timeframe. And, consequently, Atticus was a victim of liquidation rumors, which were quickly denied. We previously analyzed Atticus' holdings back in June and noticed that they had significant natural resource and mining positions at the time.

The following were their long equity, note, and options holdings as of December 31st, 2008 as filed with the SEC. We have not detailed the changes to every single position in this update, but we have covered all the major moves. All holdings are common stock unless otherwise denoted.

Atticus returned to many of their 'normal' portfolio holdings this past quarter having sold off a lot of equities amidst the liquidation rumors. Basically, they previously owned a bunch of the names you see in their top 20 holdings. They sold them. Then they bought a lot of them back. Isn't market volatility fun? Assets from the collective long US equity, options, and note holdings were $1.9 billion this quarter, back up from the $500 million they had last time around (which again highlights the massive deleveraging they saw during their little scare). So, things appear to be slowly stabilizing for them. This is just one of many funds in our Q4 2008 hedge fund portfolio tracking series in which we're tracking 35+ prominent funds. We've already covered Paulson & Co (John Paulson), Carl Icahn, Warren Buffett, Stephen Mandel's Lone Pine Capital, George Soros, Bill Ackman's Pershing Square, and Andreas Halvorsen's Viking Global. Look for our updates as we cover a new fund each day.

James Pallotta, formerly of Tudor Investment Corp, and Christopher Pia, formerly of Moore Capital Management have finally set out to launch their own funds. And, understandably, the market for raising capital has tempered their ambitious launches a bit. They are both launching, but with undoubtedly less capital than they probably anticipated.

Pallotta was in charge of the Raptor fund while at Tudor, where he placed global macro style bets on equities. We covered it when he announced he was starting his own fund and here we are again with his new fund spin-off/launch: Raptor Capital Management. We'll be tracking him from now on considering he was the one running the equities we tracked at Tudor. Raptor (while at Tudor) has seen 14% annual returns since 1993. The recent turmoil marks the longest losing record of Pallotta's career.

Pia, on the other hand, will not be trading equities, but rather currencies, commodities, bonds, and stock indexes in the true global macro style. Pia Capital Management will seek to hold 20-40 positions between 3 weeks to 3 months. So, unfortunately, we won't be tracking him since he won't be doing equities. Pia also has an outstanding track record, locking in 17% annual returns while at Moore Capital, having never had a down year.

Next, turning to Citadel, we see that Misha Malyshev has left with 2 members of his team. Malyshev was in charge of the high frequency trading unit at Citadel. And, while Citadel's main funds floundered last year, Malyshev was up around 40% last year. Its unlikely Malyshev will start a new fund in the next 18 months or so, due to restrictions in his contract.

Here's noted short seller Jim Chanos' latest interview where he talks investment opportunities in the current market on the PBS Nightly Business Report, citing his distaste for the Healthcare and Defense sectors: Video

Wednesday, February 25, 2009

In our recent post, Recommended Reading List: Technical Analysis Edition, we omitted one book from the list because it deserves its own post:

Technical Analysis Using Multiple Timeframes by Brian Shannon: This is one of the best books on charts and trading out there. It comes from the highly successful trader and well known blogger Brian Shannon of Alphatrends.net. Highly recommended. The description: "The trend is your friend, but which one? Opposing trends can be found on various timeframes in the same stock, at the same time creating confusion and worse, unnecessary losses. Understanding market structure and trend alignment allows you to put emotions aside and focus on the right stocks at the right time. Techniques covered in this book are appropriate for anyone (from daytraders to investors) who is looking to improve accuracy in their buying and selling."

Check out his book and read the reviews from other readers. This one goes to the top on our list of good technical analysis reads because its for both investors and traders... anyone looking to add technical analysis to their arsenal of tools.

This is the 4th Quarter 2008 edition of our ongoing hedge fund portfolio tracking series. Before reading this update, make sure you check out the Hedge Fund 13F filings preface.

Andreas Halvorsen is one of the many 'Tiger Cub' fund managers we cover here on the blog. 'Tiger Cubs' are the progeny of legendary investor and hedge fund manager Julian Robertson of Tiger Management. Many of the critical members of Tiger started their own funds, and Halvorsen is no different. We've already covered one other 'Tiger Cub' portfolios in our hedge fund tracking series: Stephen Mandel's Lone Pine Capital. Although both Andreas Halvorsen of Viking Global and Stephen Mandel Jr. of Lone Pine Capital both learned the tricks of the trade under Robertson in their time at Tiger Management, both have taken what they've learned and added their own spice to the value oriented, yet growth at a reasonable price (G.A.R.P.) tolerable investment style. Viking employs a fundamental strategy, using a bottom-up process to pick stocks. Viking Global's Equities III fund was +1% for December and finished the year -1.14% as we noted in our hedge fund 2008 performance numbers. You can view their month by month performance breakdown here.

Halvorsen attended Williams College and received his MBA from Stanford, while his work history includes stays at Morgan Stanley and Tiger. In Alpha's latest hedge fund rankings, Viking was ranked #70 in the world. You can view Viking's most recent year end investor letter, as well as their Q3 2008 investor letter here in .pdf format.

The following were their long equity, note, and options holdings as of December 31st, 2008 as filed with the SEC. We have not detailed the changes to every single position in this update, but we have covered all the major moves. All holdings are common stock unless otherwise denoted.

Some Increased Positions (A few positions they already owned but added shares to)Priceline (PCLN): Increased position by 28.6%Verisign (VRSN): Increased position by 18.4%Invesco (IVZ): Increased position by 2.6%

Some Reduced Positions (Some positions they sold some shares of - note not all sales listed)First Horizon (FHN): Reduced position by 32%Kroger (KR): Reduced position by 30%Aon (AOC): Reduced position by 25.5%Qualcomm (QCOM): Reduced position by 22%Apollo Group (APOL): Reduced position by 21.9%Davita (DVA): Reduced position by 10.6%St Jude (STJ): Reduced position by 7.9%

Viking changed up their portfolio a substantial amount over the last quarter. Take the bottom half of their portfolio from the previous filing, and chop it off. That's essentially what happened if you examine their filings quarter to quarter. And, they came in and replaced that void with a whole new slew of companies. Interesting to see them also basically swap out of Visa in favor of Mastercard. Assets from the collective long US equity, options, and note holdings were $3.5 billion last quarter and were again around $3.5 billion this quarter. This is just one of many funds in our hedge fund portfolio tracking series in which we're tracking 35+ prominent funds. We've already covered Paulson & Co (John Paulson), Carl Icahn, Warren Buffett, Stephen Mandel's Lone Pine Capital, George Soros, and Bill Ackman's Pershing Square. Look for our continual updates each day over the next few weeks.

Great post by Roger Nusbaum highlighting how simple it is to create an 'El-Erian' styled portfolio using simply exchange traded funds (ETFs). If you're unfamiliar with Mohamed El-Erian, he is the CEO of the largest bond manager in the world, PIMCO. And, he's a pretty smart guy. You should definitely check out his book When Markets Collide by Mohamed El-Erian. It discusses the current fundamental changes going on in the global economy and financial markets/systems. This book also recently won the Business Book of the Year for 2008. In the book, he touches on a new type of portfolio and this is what Roger has sought to re-create in simple form.

Great overall write-up from him with easy implementation of ETFs into El-Erian's new model portfolio. In terms of expanding upon his suggestions, here's our take: On the commodities front, we would try to add some SLV (Silver) or other types of commodities into the mix. In special opportunities, there are literally a myriad of ETFs that could fall into this category. We might suggest something exotic like a Carbon Trading fund (ASO or GSN) or possibly some currency exposure through FXA, FXC, FXF, etc. Other than that, all the other ETFs are pretty self explanatory as to what they track. Check out Roger's article.

Tuesday, February 24, 2009

This is the 4th Quarter 2008 edition of our ongoing hedge fund portfolio tracking series. Before reading this update, make sure you check out the Hedge Fund 13F filings preface.

Next up we have Pershing Square Capital Management. Bill Ackman runs Pershing Square Capital, a well known value/activist based hedge fund that started in 2003 after Gotham Partners broke up. The past few years, he has had notable short positions in the bond insurers such as MBIA (MBI) and Ambac (ABK). But, he has recently closed those shorts. Recently, he also detailed his plans for Target to spin-off its real-estate to unlock value. His Pershing Square IV fund, which invests solely in Target (TGT), has seen abysmal performance, as Ackman apologized for in their recent letter. We'll have to see if this proposal picks up any steam, but so far it hasn't. A great quote from Ackman has arisen from all the Target hoopla. He states, “The investment business is about being confident enough to know that you’re right and everyone else is wrong. Yet you have to be humble enough that you recognize when you’ve made a mistake. Earlier in my career, I think I had the confidence part pretty solid. But the humbleness part I had to learn.’’ We track Ackman on the blog extensively and have a lot of resources on him and his fund. Pershing has been busy lately, filing a 13D on General Growth Properties (GGP) and a 13G on Barnes & Noble (BKS). Furthermore, you can view Pershing Square's Q3 2008 investor letter here. Besides their recent 13D/G filings, let's look at what they've been up to with the rest of their portfolio.

The following were their long equity, note, and options holdings as of December 31st, 2008 as filed with the SEC. We have not detailed the changes to every single position in this update, but we have covered all the major moves. All holdings are common stock unless otherwise denoted.

Some New Positions(Brand new positions that they initiated in the last quarter):General Growth Properties (GGP)Alexanders (ALX)

Some Reduced Positions (Some positions they sold some shares of - note not all sales listed)Dr. Pepper Snapple Group (DPS): Reduced position by 51%Wendy's (WEN): Reduced position by 15%Sears Holdings Corp (SHLD): Reduced position by 39.5%

Removed Positions (Positions they sold out of completely)Wachovia (WB)Longs Drug Stores (LDG)Barnes & Noble (BKS)American International Group (AIG)Mastercard (MA)

Top Holdings (by % of portfolio)

Target (TGT): 37.91% of portfolio

EMC (EMC): 25.19% of portfolio

Wendys (WEN): 9.54% of portfolio

Dr Pepper Snapple (DPS): 7.22% of portfolio

General Growth Properties (GGP): 1.06% of portfolio

Sears (SHLD): 0.48% of portfolio

Borders Group (BGP): 0.17% of portfolio

Greenlight Capital Re (GLRE): 0.13% of portfolio

Alexanders (ALX): 0.09% of portfolio

Assets from the collective long US equity, options, and note holdings above were $2.4 billion this quarter. As you can tell, Ackman is running quite a slim, concentrated portfolio on the long side of things. His massive (and well documented) stake in Target continues to hurt him and the Pershing Square IV fund. While there has been much made over Ackman's foray into shares of GGP, you can also now see that he has added Alexanders into his portfolio, but at in small size relative to his portfolio as a whole. For more thoughts from Ackman, check out his insightful interview with Charlie Rose or his recent speech at the Value Investing Congress. This is just one of many funds in our hedge fund portfolio tracking series in which we're tracking 35+ prominent funds. We've already covered Paulson & Co (John Paulson), Carl Icahn, Warren Buffett, Stephen Mandel's Lone Pine Capital, and George Soros. Look for our updates as we cover a different fund every single day.

In his most recent Bloomberg interview, trader, economist, and author of the Gartman Letter, Dennis Gartman has claimed that Gold is becoming the world's second reserve currency behind that of only the US Dollar. He cites that all major currencies are so weak and so people are moving away from paper money and into gold. And, with gold hovering around $1000, things could get interesting. Dennis says the 'trend is up and will likely continue to be up.' Basically, he likes to buy dips here and ride the trend. He had talked gold in a previous interview as well.

He currently says to sell the yen due to the stifled economy and weakness of their administration. There are simply too many problems in Japan and the charts point to that in the Yen. He also likes to watch the EUR/JPY cross as an indicator of markets. When that currency pair has headed south over the past year, the markets trend the same way.

Basically, he harps on the 'emerging markets' adage, but notes that China and India's standard of living is rising. And, his theory is that once they taste such a lifestyle, they won't want to return to old ways and the culture will shift to consuming more food. Overall, increasing population and increased ways of living require more food, healthier food, etc. (Hence, his bullishness towards food and agriculture). If you agree with Coxe, you can use the ETF: DBA (agriculture) to play the inflationary commodity and food thesis longer-term.

And, in terms of agriculture specifically, Potash (POT) is a solid play due to its dominant market share on the nutrient. Even as demand for the nutrient has decreased (slowed global growth), prices haven't fallen off a cliff like oil. So, when demand does kick back up, these producers should have some form of pricing power once they work off supply build up. We've seen numerous hedge funds pick up POT lately, including George Soros. Check out our in-depth look at Potash for more analysis and info.

Keep in mind though, that such plays could take a long while to unfold. If you conclude that inflation is in the future, then Coxe's thoughts could be right on the money. For what it's worth, Jim Rogers and George Soros are both bullish on agriculture as well. Our stop was triggered on our Potash position way back at $160 as per our post, and we have yet to revisit the name which now trades around $80, or 6x earnings. While the story is still attractive fundamentally long-term, signs of improving technicals (chart) would be needed. Or, perhaps some return of global economic activity and a hint of inflation would do. Regardless, the funds have been buying recently, as noted in our hedge fund portfolio tracking series.

We'd agree with Coxe in that inflationary pressures are set to show up at some point. And as such, we advocated shorting long-dated treasuries (see our rationale). The question is, when does inflation hit? One could be waiting for a while. And, there is the slight possibility that it could also just never show up (stranger things have happened). Obviously, if such inflation does occur, it will show up in commodities first and Coxe makes a good point there. In short, Coxe seems to agree with Rogers and Soros on a number of issues and it will be interesting to see things play out.

Monday, February 23, 2009

This is the 4th Quarter 2008 edition of our ongoing hedge fund portfolio tracking series. Before reading this update, make sure you check out the Hedge Fund 13F filings preface.

Next up is Soros Fund Management ran by George Soros. Soros is famous for his stellar returns with partner Jim Rogers when they ran their Quantum fund. Now, he has carried his investment style over to his own firm, Soros Fund Management. Whether it be equities, bonds, currencies, debt, or commodities, Soros is more of a global macro player, seeking investments in whatever market they can gain an edge. So, keep in mind that these equity positions only represent a portion of the fund's overall holdings. They are not required to disclose holdings outside of equities, notes, and stock options. 2008 was an interesting time to be investing, to say the least. Recently, Soros detailed his thoughts about his portfolio from 2008 and it makes for a good read. His fund finished '08 up 8% as noted in our hedge fund year end performances post. His success in 2008 came from making correct bets on the US dollar and betting that short term interest rates in the UK would decline. Interestingly enough, Soros was down for much of the year, until he fought his way back with overtrading.

Soros is good to track because of his excellent macro sense and formidable track record as an investor. His thoughts on the current financial landscape are detailed in his latest book, The New Paradigm for Financial Markets: The Credit Crisis of 2008 and What It Means. Soros sees a vast consolidation in the hedge fund space in the near future, as we noted when we recently checked in on Quantum Fund ex-partners Jim Rogers & George Soros. If you want to get a better sense as to how Soros formulates his investment theses, we highly recommend reading his first book, The Alchemy of Finance. This book is a staple in our recommended reading list and after you read it, you'll understand why. We like to track Soros since he has a solid track record and a great macro sense. We'll see what he has in his portfolio this time around.

The following were their long equity, note, and options holdings as of December 31st, 2008 as filed with the SEC. We have not detailed the changes to every single position in this update, but we have covered all the major moves. All holdings are common stock unless otherwise denoted.

The major moves in Soros' portfolio come from energy and agriculture. He added large to his PBR and POT positions, among many other global growth type names. He definitely seems to think all these energy related names are attractive. He sold out of a lot of his Walmart (WMT) and all of his Research in Motion (RIMM). He also added heavily to his position in Best Buy (BBY). He also started a new, large position in Merrill Lynch (MER). Assets from the collective long US equity, options, and note holdings listed above were $4.6 billion. If you want to hear some more insightful thoughts from George Soros himself, head over to our post on Hedge Fund manager interviews or check out his recent interview with Fareed Zakaria to discuss the current crisis. This is just one of many funds in our hedge fund portfolio tracking series in which we're tracking 35+ prominent funds. We've already covered Paulson & Co (John Paulson), Carl Icahn, Warren Buffett, and Stephen Mandel's Lone Pine Capital. Look for our updates each day over the next few weeks.

If you've missed it, Rick Santelli of CNBC recently had a rant about capitalism which has been seen as a rallying cry. He's even talked about arranging a 'Chicago Tea Party' for capitalism. Santelli is one of the few/only brightspots on that channel.

The rant:

(RSS & Email readers might have to come to the blog to view the video)

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